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Petroleum

Oil Prices Surge on Reports of Saudi Arabia's King Fahd's Stroke

Strategic Insights

— 2 min read

Reports of Saudi Arabia's King Fahd suffering a stroke last week sent shockwaves through the energy market, driving up the price of crude oil futures on the New York Mercantile Exchange (Nymex). Saudi Aramco's move to boost prices for crude oil exports to the US market, unrelated to King Fahd's condition, further fueled the price increase. Analysts predict that the price could go as high as $18.80/bbl, driven by concerns over the future of the world's largest oil exporter and the potential impact on global oil supplies.

Key Takeaways:

  • The Nymex crude oil contract increased by 20 cents to $18.63/bbl, driven by reports of King Fahd's stroke.
  • Merrill Lynch analyst Nauman Barakat predicted that the price could increase to the range of $18.75-$18.80/bbl, citing concerns over the future of Saudi Arabia's oil production.
  • Saudi Aramco raised term crude prices to the United States by up to 35 cents/bbl, citing a move unrelated to King Fahd's condition.
  • Concerns over the future of Saudi Arabia's oil production center on the potential policies of King Fahd's successor, Crown Prince Abdallah, who may favor reduced output to bolster prices.
  • Analysts are skeptical that reduced output would be a viable option for Saudi Arabia, citing the country's financial requirements.
  • The strike in Venezuela, which workers had threatened to start Monday, will now not occur before Thursday, if at all, after government and oil worker union officials announced they would continue meeting to head off the strike.
  • The January heating oil contract on the New York Mercantile Exchange (Nymex) settled up 1.36 cents at 54.03 cents/gallon, driven by cold weather and subsequent scrambling to cover short positions.
  • Meteorologists forecast a severe cold front from Canada will arrive late in the week in the Midcontinent, moving east over the weekend, which may further fuel the price increase.

Statistics:

  • Nymex crude oil contract price increased by 20 cents to $18.63/bbl.
  • Expected price range: $18.75-$18.80/bbl.
  • Saudi Aramco raised term crude prices to the United States by up to 35 cents/bbl.
  • Arab Heavy crude price increased by 35 cents/bbl.
  • Arab Medium crude price increased by 30 cents.
  • Arab Light crude price increased by 20 cents.
  • Berri crude price increased by 10 cents.
  • January heating oil contract on Nymex settled up 1.36 cents at 54.03 cents/gallon.

Sources:

  • Unidentified U.S. officials
  • Nauman Barakat, Merrill Lynch analyst
  • Alan H. Levine, Dean Witter Reynolds Inc. economist
  • Saudi Aramco
  • Government and oil worker union officials in Venezuela
  • Meteorologists forecast.

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